Financial markets in an era of IOT, blockchain and AI : by Pritam Banerjee

Imagine the scene of stock exchange robbery in “The Dark Knight Rises” – hundreds held hostage and billions of dollars robbed in broad daylight. This plot epitomises the impact of a weak link in the chain of financial services and underscores the need for a secure and robust system for obscuring the possibility of financial debacles. FinTech, the technology that is disrupting the status quo, is driving efficiency and enabling innovation in the financial markets. This enabler is built around the primary themes of convergence of other industries into financial services, and a transformative journey which involves leveraging of disruptive ideas like the Internet of Things (IoT) and blockchain technology.

IoT in financial markets

In this context, technology-driven by sensors and web, collectively termed as the IoT, has been the front-runner in changing the landscape by disrupting the very way of conducting business, accounting for nearly 28.5% revenue growth. With IoT expected to enable nearly $11 trillion economic growth, its applicability in the financial market is no longer a sci-fi abstract.

Components of FinTech 

Intelligent Automation – new co- worker for digital age

Platforms – New ways of growing business

IoT – Door to the customer’s value chain

Cloud – Agility, cost, security, compliance

Blockchain – Impacting centralized business models

With the early signs already there with IoT in banking, the key interest lies in how the banks leverage the availability of the huge volume of physical and observational data to create opportunities in better understanding the creditworthiness of customers. The ability to continuously monitor asset conditions with the help of sensor nodes mounted on physical items will allow banks to project timely lending services. With Barclays opting for smart piggy bank services, it is evident that IoT enabled services will be used by the leading banks to attract the young audience by making them understand the value of money in a cashless society. The launch of pay bands in the form of smart wearables further underlines the growing impact of IoT as an alternative option to facilitate contactless payment systems.

IoT also promises to change the way how the insurance sector functions, by enabling continuous engagement and positive relationship between the policyholders and the insurance company. With the use of IoT, the focus is shifting from a restitution-based insurance policy to a preventative one, by using real-time data to mitigate risks. The availability of granular data will lead to the unbundling of insurance offerings to focus more on need-based insurance at a reduced premium. Beyond personal insurance coverage, the commercial insurance sector also stands to gain from IoT implementation, permitting the providers to gauge uncertainties in real-time.

Finer Customer Segment

Implications of IoT for Insurance Industry [4]

The use case of IoT implementation in the asset and wealth management industry, as well as capital market, is showing a strong positive trend, with clients demanding enhanced digital experience in terms of transparency and access, beyond the simple features, functions and tools. Analysis of investment patterns based on data encompassing one’s action and inclination collected through the IoT network is a primary example of how portfolio managers can leverage the power of digitalization to offer customised experience around data. Keeping up with the trend of mobility – the modern mantra in wealth management to develop new channels for enhanced customer relationship, retention and potential profitability – firms are making use of the live data flow to automate fund allocation based on risk resilient models. Machine learning algorithm running on real-time data collected over the sensor nodes is also promising to open up new avenues in the capital markets, with better prediction of the dynamic market behaviour, thereby enabling the formulation of comprehensive trading strategy devoid of human intervention.

The real estate sector also stands to benefit from the IoT implementation, as it enables factual and transparent property valuation and easier transaction proceedings. Furthermore, it is the internal risk management within the financial institutes which can be better handled using IoT solutions, allowing to continuously monitor the vulnerable operational issues that can eventually lead to fraudulent activities or lacklustre performance from employees.

Blockchain in financial markets

According to PwC Global FinTech Survey 2016, 56% managers have already identified the relevance of blockchain technology in the financial spectrum. The blockchain in simple terms is a ledger that is distributed on several nodes. The system has no central authority, instead, it is a shared record of transactions distributed over a vast network of users. This distributed ledger has brought about a fundamental evolution in trust management among interacting parties, ranging from clearing houses to trading houses, settlement centres to the provision of tax receipts made through government.

The biggest gain in terms of financial uses of blockchain that has kept the large banks excited is maintaining track of trades, in bonds or stocks, and making sure that payments are made properly – eventually leading to the abolishment of the current complex process involving banks, traders, exchangers and clearing houses and making sure that blockchain is used to log ownership data to get the work done in minutes. This use case is expected to save banks $20bn. per year, as it promises to free up huge fund currently tied up waiting for trades to be processed, and even streamline cross-border remittance by 2-3%.

Blockchain technology will also lead to reduced risk in this sector, ensuring easy traceability of transactions, which in turn enhances real-time accolade and reward management for banking and insurance industry through a 24*7 feedback mechanism.

The system of distributed ledger also promises to significantly reduce online fraudulent activities which cripple 45% of financial agents yearly. The blockchain architecture consisting of series of data blocks, each recording a batch of transaction, electronically chained together through advanced cryptography, makes it particularly robust against hacking attempts. This disruptive technology is also capable of cutting down on compliance cost, as it eases up the online identification process, allowing the re-iterative use of verified data.

The insurance sector will also be positively impacted by the blockchain technology, through a shift towards digital contracts running on the de-centralised ledger network. These smart records are capable of automatically bargaining and implementing statutory specifications, and thereby speed up the claim settlement process between the involved parties without mediator intervention.

With NASDAQ venturing into this disruptive technology, it is clear that blockchain will redefine trading experience and the capital markets. Riding on the success of enhanced trade

efficiency, the cryptocurrencies powered by blockchain technology is turning out to be an exclusive crowdfunding instrument. Moreover, the capabilities ranging from a decentralised stock exchange to the eradication of brokerage service, increased scalability to an augmented performance by tackling redundancy is greatly propelling share dealings.

Trade Finance on Blockchain [10]

Another promising use case of blockchain technology is the advent of cryptocurrencies. The bitcoin blockchain, operated by bitcoin miners who organise and secure a tiny fraction of bitcoin transactions into the blockchain, is leading a currency revolution across the globe. With countries like Canada set to try out digital currency, blockchain technology showcases a wide prospect in transforming the financial business models.

AI in financial markets

Robotic Process Automation will reduce the manual paperwork catapulting customer delight through a faster turnaround of financial services. This will also change the pattern of employment in the industry as tedious clerical work would lose human dependency. Not only will ML impact the simpler jobs in the financial sector, it obtains the capacity to replace partially, if not totally, the advisory roles of financial consultants. Robo-advisor uses ML algorithms for portfolio management tailored to client’s needs. HDFC Bank uses its chat-bot, Eva, not only to make life easier for its employees, but also for providing seamless service to all its customers enhancing loyalty and advocacy. The launch of “Thought Factory” by Axis Bank which is aimed to innovate AI solutions for banking operations underscores the degree of influence of technology in this industry.

The magic of AI is also being utilized for performing sentiment analysis using the social media outlet to enable the financial services including high-frequency trading and hedge funds. A further proliferation of this asset will be the algorithms developed in devising trading signals for making investment decisions. Although a double-edged sword at times, this technology can only improve for the betterment in the future. The usage of AI for credit risk analysis and customer churning forecast have released newer avenues of operation in the financial arena.

A further modification of the tools may lead to bots as relationship managers and advisors on matters related to taxation and retirement. It has also been claimed that bots, trained in market pattern study, may contribute to about 80% of the daily stock trading amount by buying and selling stocks in nanoseconds.

Industry 4.0 is here, and the greatest leap in advancement will be in the field of FinTech. Yes, money still cannot be planted in fields, but certainly, money can be motioned through sound investment for improved velocity and accelerated growth. The progress of the financial sector is indispensable for overall economic growth. Considering the path of progress chartered on the wheels of technology, we can certainly be hopeful for a fruitful ride.

 

 

References

[1] “FinTech – Did someone cancel the revolution?” a report published by Accenture

[2] “4 Ways IoT Changes the Financial Services Industry” by Andrei Klubnikin, Senior Content Manager at R-Style Lab

[3] “Banking in the age of disruption” – report published by EY

[4] “The Internet of Things: Opportunity for Insurers” by ATKearney

[5] Survey by Kreyon

[6] “Banking and Financial Services: Pleasing Customers, Fighting Fraud” – report by Tata Consultancy Services

[7] Deloitte and Gartner, October 2015 The Financial Brand

[8] “Blockchain technology in the Insurance Sector” by McKinsey&Company

[9] “Beyond Blockchain: The blockchain revolution in financial services” by Kevin Petrasic and Matthew Bornfreund

[10] Virtusa

[11] Pwc Global Fintech Survey 2017

[12] Artificial intelligence and machine learning in financial services – Market developments and financial stability implications by the Financial Stability Board

[13] Baker & McKinzie

[14] “The Fintech of Things: How IOT affects Financial Services” by Sachin Modak (http://www.fintech.finance/01-news/the-fin-ternet-of-things-how-iot-affects-financial- services/)

[15] “Future Scenarios for IOT in Financial Services” by Deloitte

[16] “4 effects of blockchain on financial services” by Koker Christensen and Jeff Dennis (https://www.blockchaintechnews.com/articles/4-effects-of-blockchain-on-financial- services/)

[17] “5 blockchain technology use cases in financial services” by Deloitte

[18] “Partical Examples of how blockchains are used in banking and the financial services sector” by Bernard Marr (https://www.forbes.com/sites/bernardmarr/2017/08/10/practical- examples-of-how-blockchains-are-used-in-banking-and-the-financial-services- sector/#76e928241a11)

 

[19] “The impact of blockchain revolution in the financial sector” published in Tetranoodle (https://tetranoodle.com/impact-blockchain-revolution-in-financial-sector/)

[20] “Financial Services Technology 2020 and Beyond: Embracing disruption” – a report published by PwC

[21] “AI Applications in the top 4 Indian Banks” by Ayushman Baruah (https://www.techemergence.com/ai-applications-in-the-top-4-indian-banks/)

Handle with Care When it comes to Marketing

Marketing is like fire when smartly handled, it can destroy your enemies, but when not it can burn you. – Anonymous

When the British ruled India, many Indians accepted to work under their policy, and they did not try to rebel against the British for their presence in Indian lands; They recognized the benefits of British rule. What was the factor that made Indians accept the British government? The perception about British-policies (about trading, pay-scale and positioning in the military) had been done through various marketing channels in such a way that it brainwashed people of the nation and many were ready to accept the British. So the Marketing is like fire when smartly handled, it can destroy your enemies, but when not it can burn you.

Marketing is to design and develop a pathway from product or service to the customer through a promotional strategy. Marketing depends on a variety of parameters which can be classified broadly boiling down to vital three. These are ‘What type of customer are marketing team is focusing on (based on gender, age, location, customer-class) (W1)’, ‘What are Product Specification or Applications you need to bring in front of customer (W2)’, ‘What is your Product Promotion flow path (W3)’, ‘How much time it takes to convey product information to customer (H1)’. These criteria are what I call ‘3W1H’ forms. These basics need to be taken care while developing a marketing strategy for the upcoming product. However, are they sufficient? No. There is one more parameter called the Feedback mechanism (FM). Generally, machines use the feedback mechanism to check output generated is as per input is given or not and if it is not, the input is corrected to get the required output. When it comes to human beings, he/she is surrounded by multiple products on a daily basis through social media, TV advertising and so forth. Slight uncertainties on either side in observation can make a positive or negative impact about the product on the consumer’s mind. In the feedback mechanism, the marketing team needs to answer only one question “What kind of product image built in the customer mind through promotional activities?” If product image not built as per expectation, then management has to review and work on 3W1H as per discussed earlier. So let’s elaborate how 3W1H approach works along with feedback mechanism.

After deciding the customer range, you can work on other activities. Since the customer is conscious about purchasing the product and when the product promoted, the first thing the customer will check is its usefulness and if his/her answer is ‘Yes,’ then the customer will start comparing with similar alternative products in the market. Therefore one should present the product along with some unique thought and express the product in such a way that its image imprinted into the consumer mind. For example, the polio campaign in India. The government had taken the initiative to make India polio-free by spreading awareness through all types of social communication mediums, in which Television played a vital role. Legendary cinema actor ‘Amitabh Bachchan’ was selected as an ambassador for this campaign. Initially, the advertisement published in which Amitabh pleaded people for vaccinating the children within a fixed schedule. The advertisement circulated throughout the nation, and no stone was kept unturned by the government to make this campaign successful. However, much to the surprise, advertising failed miserably to attract a deprived community in polio booth. This promotion failure was because of non-consideration of the customer (W1) and how advertise impacted its application on the customer (W2)? So after analyzing failure,experts recommended changes in their marketing campaign like, to focus on major customer (Here mainly village woman who generally spend their time in home by watching TV), type of impact on people (People who watched TV during that era, had an image of Amitabh as ‘Angry young man’). So the campaign improved their advertising by bringing out the same angry Amitabh instead of his soft-image which used in the earlier campaign. So in a very next polio campaign number of people in polio booth suddenly increased and when feedback taken from people about such a sudden change, they replied that we don’t want to watch ‘Amitabh sir’ getting angry because of us. ⁽¹⁾

In W3, we have to focus on what kind of path we use to attract the customer. Currently, there are a lot of platforms available by which you can market your product. The main agenda you should keep in mind is that how effectively you can engage customer through marketing, at very first, if you make an impact on customer then only he can show interest in your product. For example, changes in launching trailer of the upcoming films. Till 20^th century Television and newspaper were crucial factors, but now along with television, marketing team take help of internet resources like Youtube, Facebook, introducing an article on the pre-trailer phenomenon. Increasing the range of promotional devices, broadcast formats and publishing platforms provide a broad range to promote the film and choosing right platform may lead to a massive hit in the box-office.

For the last factor (H1) time, the obvious question that comes to mind is that ‘Is time for advertising matters?’, While watching the TV when an advertisement appears, many times we change the channel instead of watching the whole advertisement or ignore it altogether. You do have an option of ‘Skip ad’ when you watch anything online, so one must decide how much time is required to deliver product information during its promotion? Providing product information in less time, creating the possibility that the customer will be willing to watch it and may result in attracting the customer. However, as one must have guessed it, this will not work at all the time. Other factors like the cost of the product, application range, type of customer can also affect the H1. For example, the customer would be more conscious while watching higher priced product broadcast compare to the lower priced one. So it would take more time for the marketing team to convince the customer to buy the costly good than the lower priced one.

After implementing marketing strategy as per 3W1H, we need to work on a feedback mechanism in which organization has to collect information about product image generated in customer’s mind through dealers and using feedback-form. Not using the feedback mechanism may lead to failure in achieving ‘product sales target’ and can make the situation even worse. Take the example of ‘THE TATA Nano-MAKING OF WORLD’S CHEAPEST CAR’ which was mind-blowing one-of-a-kind project in Indian automobile industry. From the first phase of a marketing campaign, TATA Nano was on so much continuous limelight that this project was pleased by former American president Barack Obama. ⁽²⁾ The curiosity about the product was so high that the sale of then-leading car model Maruti-800 was dropped by 20% immediately after unveiling the Nano. ⁽³⁾ However, while marketing the product, an organization built “Affordable, Garibo Ki Car” image in customer’s mind, which made customer conscious about what will be their status-quo in society after buying Nano? Thus, they started giving preference to two-wheeler’s over Nano, During the same time; some instances of Nanos catching fire came into focus which worsened the situation. This case even exacerbates when the team did not work on the feedback mechanism and hence, was not able to change customer perception about Nano. Later, when Nano fire problem was technically sorted out but even then the marketing team did not make any impactful effort to market the improved safety of the car. Therefore, customer’s negative perception remained stuck and the organization did not even come close to achieving selling figures of Nano. If the organization had used feedback mechanism, it would have been an entirely different story.

So 3W1H can be an essential factor while developing a marketing strategy for the product along with a reversible FM method. This method can help us to monitor Product marketing throughout the phases and can help the marketing team to change strategy whenever it goes into the wrong path.

 

 

 

 

References-

(1) https://www.thehindu.com/news/cities/Delhi/when-amitabhs-voice-did-the-trick-to-make-india-polio-free/article6257123.ece

(2) https://www.businesstoday.in/obamas-india-visit/nano-catches-worlds-most-powerful-mans-eyes/story/10144.html

(3) https://www.autocar.co.uk/car-news/new-cars/nanomania-overwhelms-indian-car-market

 

What Acts of upholding freedom can counter the shrinking space for dissent & tolerance in society?

अब वही हर्फ़-ए-जुनूँ सब की ज़बाँ ठहरी है

जो भी चल निकली है वो बात कहाँ ठहरी है

This is Faiz Ahmad Faiz giving us the exact idea of how freedom works. I’ll come to this later.

What Acts of upholding freedom can counter the shrinking space for dissent & tolerance in society?

The question that we wish to find an answer to would not have been significant if ours were an ideal country. The answer is obvious: any act that is committed with honesty and is in the ambit of basic humanity is an exercise of freedom and hence an act of upholding freedom.

Then why waste our time thinking about this fundamental question when we can simply share memes on Facebook, feel bad about Syrians, curse Pakistanis, feel proud about UNESCO declaring India’s national anthem as the best national anthem, binge-watch episodes of friends on weekends and go back to sleep?

Well, we are bothered because ours is not an ideal country. Of all the countries in the world, India can never become an ideal country because of its very nature. Because of a plethora of definitions of an ideal country available here.

I am not denigrating India. I would never do that. Not because I am a patriotic bharatvaasi but because I neither have resources nor patience to defend myself against a sedition charge in court.

So, let us say ‘hypothetically’ that ours is not an ideal country and try to deconstruct the question.

First, what do we mean by act of upholding freedom? Like darkness can only be defined by the absence of light, freedom can only be defined by the degree of un-freedoms (a term used by Amartya Sen in his book Development as Freedom). Only its absence can be felt, not its presence because the realization that you’re free begets the possibilities of certain un-freedoms you might be subjected to.

For example, a student who has left his hometown for the first time realizes that he can do whatever he wants without the fear of his parents. This is his first degree of freedom. But this realization comes with the baggage of morals that chain him from doing something that is considered ‘bad’ in the society.

So, is it even possible to be absolutely free? Not at all. We would not have been social animals if we were absolutely free.

We carry with us the responsibilities of our society that behoves us to follow a certain set of rules. For eg: don’t break the traffic signal, don’t litter, don’t try to run your car over people sleeping on footpath etc. If we take humanitarian obligations out of the equation, all these rules are nothing but chains of ‘unfreedom’.

So, if it is not possible to be absolutely free, why do we bother even talking about freedom? Because we choose not to break any traffic rules, we choose not to litter and most of us choose not to run our cars over people sleeping on footpaths.

You might say that this is because law prohibits these actions but aren’t we the ones who choose to follow the law of this country? What if we don’t follow the law of this country? Aren’t we the ones who directly/indirectly elected our leaders to frame the law for us? Aren’t we the ones who chose to follow the constitution of this country? The word choose is important here because it adds one extra degree of freedom to our thousands of unfreedoms. That extra degree of freedom is what is worth defending and fighting for.

Now let’s come to the second question. Is the space for dissent and tolerance in our society shrinking?

Unfortunately, yes. If not directly then indirectly. Fali Nariman in his speech once said that it is not the freedom of speech that matters, it is the freedom after speech that we should be concerned about. We have Gurmehar Kaur amongst us and we all know what happened when she tried to express her opinion on social media and she was talking about peace for God’s sake.

A simple act of expressing your honest opinion is seen as an act of hostile political motives. Every comment you make will be seen in terms of black and white. But the space for debate and discussion lies in the grey area and we all, who want to uphold freedom, should understand it and avoid falling for any trap of extreme opinions.

To avoid that trap, I have a set of commandments for you. I know this is ironical. On one hand, I am asking you to avoid extremism and on the other hand I am trying to profess in the worst possible manner i.e. commandments but bear with me.

First and the most important one is: Make good lawyer friends. Section 124A of the penal code is a reality in 21^st century India.

Second, question everything. Everything! Even the act of questioning everything.

But question to seek answers. This should be clear. It is very easy to fall for ‘whataboutism’. What about 1984, what about 2002, what about this, what about that etc. This line of questioning is dangerous as it sucks the humanity out of the argument. And who wants to be a twitter troll anyway!

Please don’t misunderstand me. I am not asking you to be cynical. Seeking answers and questioning for the sake of questioning are two completely different things and we should understand this difference.

Third, if you disagree with someone, make sure that he/she knows that you disagree with him/her.

 Start with your family. A society can only be called free if its people are capable of handling disagreements and this cannot be achieved in a single day. It will take time. It’ll take practice. It’s disheartening for people to know that their arguments are worthless and this is what drives their violent instincts in most of the cases. This is true only for people having a limited capacity to think. But this should not hold you back.

Tell them that their argument is worth a heap of dump but also don’t forget to tell them the importance of dump. Dump exists because we exist.

But make sure that you do not commit any violence in this process. There’s no need to slap your friend just because he happens to be a BJP supporter. These days it’s not wise to slap a BJP supporter anyway!

This brings me to my next commandment: Listen.

Keep your eyes and ears open. Listen to the arguments of even those who are against freedom of expression and you’ll be surprised to know that there are many. If you’re professing freedom, by no means should you not allow the opposite party to express their opinion.

Counter them with fierce arguments but never ask them to shut up. You have no right to.

Fourth, and the most difficult commandment to follow: try not to be afraid of anything

I’ll go back to Faiz Ahmad Faiz now:

अब वही हर्फ़-ए-जुनूँ सब की ज़बाँ ठहरी है

जो भी चल निकली है वो बात कहाँ ठहरी है

It is impossible to supress anyone’s desire to express himself/ herself. The only instrument that can make this possible is fear. Fear is something that is not in our control and yet drives us to do most of the things we do. We all are afraid of something. Ghosts, God, cockroaches etc.

We should try not to be afraid of at least expressing our opinions. Even if you make the perpetrators of violence realise that you’re not afraid of speaking up, you take away the only instrument they have to suppress your freedom.

This is where the role of government comes into play. Do you feel secure enough to express your opinions? If you do, speak up. If you don’t, you have all the more reason to speak up.

Jim Morrison once famously said:

“Expose yourself to your deepest fear; after that, fear has no power, and the fear of freedom shrinks and vanishes. You are free.”

I know this is easier said than done. Not everyone wants to be a freedom activist. People want to lead their normal life. They want to go to work, come back and sleep to wake up again to go to work without exploring the meaning of freedom. How to make them explore the meaning of freedom?

This brings me to my final commandment: passionately follow any form of art that is accessible to you.

Be it cinema, poetry, literature, music, painting…anything.

This will allow you to explore what is beyond normal. Something that is not a part of your day to day life. It is only when you are exposed to new ideas that you get to know what freedom is by peeling off the quotidian unfreedoms you never realised you were subjected to.

Artists show you the limits of freedom by exercising it fiercely. When we see the likes of Salman Rushdie, Faiz Ahmad Faiz, Toni Morrison, Bob Marley, Tasleema Nasreen and numerous others, we realise that life can be something beyond ordinary and it is possible that their examples make you explore your extent of freedom.

Virginia wolf once said:

“Lock up your libraries if you like; but there is no gate, no lock, no bolt that you can set upon the freedom of my mind.”

and your mind can only be free when you eliminate fear from it and that I believe is the only way in which you can counter the shrinking space for dissent and tolerance in our society.

 

 

 

 

 

 

Friendship Bands : by Vybhav Shetty

Once again this day comes to pass
When my hands are adorned with colorful bands
their significance majestic and their show grand
so look with contempt, wonder and awe
as I show you my bands, my friendship bands.

Bonds of every color and size I do possess
some closer to my heart and some further than the rest
some have remained firmly over the years and
some have fallen down leaving behind tears.
so look closely as each of it tells it’s story
these bands, these friendship bands.

I have bands that have changed colors
sometimes for better and sometimes for worse
some are there, on which are written obnoxious names
these are the one’s that love me just the same
so watch as I flaunt this myriad of strings,
these bands, these friendship bands.

They are knotted to last a lifetime
but not all do stand the test of time
sometimes I was to blame, while for others
the situation couldn’t be tamed
so watch my celebration and repentance with
these bands, these friendship bands

I have one that stays foremost
supremacy over others, is of which it boasts
the best and worst all it has seen
with the tightest of bonds it reigns
so watch it hurl and furl about
this band, this friendship band.

The meek, the rude.the gentle, the crude
I walk with an arsenal of all
together our paths we shall chalk
and to the end of it we shall walk
so watch me as my promises lay broken and fulfilled
these bonds, these friendship bonds.